Plans have been formulated and multiple banks have responded to the reduction of interest rates on existing housing loans: multiple factors need to be considered

How are banks preparing for the highly anticipated interest rates on existing mortgage loans? What impact will the implementation have on banks? As the semi annual reports are gradually disclosed, various banks have responded at the mid-term performance meeting. Several bank executives have stated that corresponding contingency plans have been developed. At the same time, practical operations need to consider various factors such as regional and city differences, as well as the intensity of interest rate adjustments. The reduction of interest rates on existing housing loans may put pressure on the net interest margin.

CMB: Downregulation is imperative and corresponding contingency plans have been formulated

Peng Jiawen, Assistant to the President of China Merchants Bank, recently stated at the bank's mid-term performance exchange meeting, "From the central bank's statement, 'encouragement and support' has directly turned into 'guidance'. I believe that the reduction of existing housing loan interest rates is also imperative and a high probability event. Currently, we have formulated corresponding contingency plans. We have divided the calculation into three scenarios: optimistic scenario, neutral scenario, and unfavorable scenario. Based on the calculation results, it is generally controllable and should still be under our control."

He also stated that there is no final plan yet, and the main consideration is that there are many factors that need to be taken into account. For example, how to balance the issue of implementing policies based on the city, how to consider fairness while implementing policies based on the city, and whether the banking system can support it. These are all particularly complex, different cities and branches, and many customers have different situations, all of which need to be considered. Overall, under the guidance of the central bank, China Merchants Bank will steadily promote implementation in accordance with the principles of marketization and rule of law.

"Of course, don't just focus on negative impacts. Personally, I believe that the adjustment of existing mortgage interest rates also has its positive impact. Firstly, the background of the decrease in existing mortgage interest rates is that the amount of early repayment is relatively large. With the decrease in existing mortgage interest rates, the factor of early repayment of the entire housing loan will be digested to a certain extent, which in turn will bring about an increase in mortgage volume. Secondly, with the decrease in existing mortgage interest rates, it will to some extent enhance our customers' stickiness, which will further deepen our understanding of customers' operations and be beneficial to the growth of retail business. Therefore, we cannot only focus on the negative impact on short-term finance, but there are also favorable aspects in the long run. We will implement it prudently in the future."

China CITIC Bank: will actively implement regulatory requirements based on interbank execution standards and market changes

Xie Zhibin, Vice President of CITIC Bank, stated at the bank's semi annual performance conference that he closely monitors regulatory guidance and market trends, and timely reviews and analyzes the bank's internal business situation. He has prepared contingency plans for possible business adjustments. In the future, CITIC Bank will actively implement regulatory requirements, fulfill social responsibilities, and balance business development with customer operations based on interbank execution standards and market changes.

He said that in practical operation, it is necessary to consider the consistency of customer policies, as well as the differences in different regions and the intensity of interest rate adjustments. For example, from the perspective of customers, banks implementing equivalent standards is more conducive to improving fairness and reducing customer public opinion. However, from a regional perspective, historical real estate policies have been "tailored to the city", with significant differences in mortgage loan interest rates across regions, making it difficult to implement a "one size fits all" management policy for stock interest rate adjustments.

"For example, from the perspective of adjustment intensity, it is also necessary to consider the actual bearing capacity of banks. According to some mainstream securities research institutions, for every 10BPs decrease in mortgage interest rates, the impact on the industry's net interest margin is about 0.9-1 BP. Currently, CITIC Bank's mortgage loan scale is about 950 billion yuan, of which 600 billion yuan is higher than the newly incurred interest rate, and for every 10BPs decrease in these mortgages, it will affect loan returns by about 600 million yuan, affecting the net interest margin by 0.8BPs. Compared with the industry's overall 0.9-1BPs, it still has a slight advantage, maintaining cautious optimism." Xie Zhibin said.

Construction Bank: Overall, it will bring certain downward pressure on the bank's net interest margin

The Chief Financial Officer of China Construction Bank, Sheng Liurong, stated at the bank's mid-term performance conference that the reduction in existing mortgage interest rates will indeed have a certain impact on the bank's subsequent net interest margin level. Due to the lack of specific guidance plans from regulatory authorities and active communication among banks, it is currently difficult to calculate. However, overall, it will bring some downward pressure on the net interest margin of banks.

"In the recently released second quarter monetary policy execution report of the People's Bank of China, there is a statement that 'commercial banks need to maintain a reasonable level of profit and net interest margin to maintain stable operations and prevent financial risks.' This statement indicates that maintaining a certain level of profit and net interest margin for commercial banks can help enhance the sustainability of supporting the real economy. From this perspective, the policy orientation is to hope that the net interest margin of commercial banks can maintain a relatively stable trend." Sheng Liurong said.